Rio Tinto Rejects N.Z. Offer of Support for Smelter, Key Says

April 2 (Bloomberg) -- Rio Tinto Group, majority owner of
New Zealand’s only aluminum smelter, rejected an offer of a
short-term government subsidy to keep the plant running.

“They came back at the weekend and said ‘no, we’re
rejecting the government’s intervention’,” New Zealand Prime
Minister John Key told TV3 today. “The government’s not going
to change its position.”

Key’s government became involved after Rio unit Pacific
Aluminium and electricity supplier Meridian Energy Ltd. were
unable to agree on price terms for the smelter, located at Tiwai
Point on the nation’s South Island. Rejection of offer stokes
concern the plant may close, cutting jobs and curbing exports.
Bruce Tobin, a Melbourne-based spokesman for Rio Tinto, didn’t
immediately return a phone message seeking comment on the
rejection.

“We do think it made a bit of sense on balance to try to
support the process, and that’s where we’ve been simply because
of the number of jobs involved,” Key said. “In the end, that
hasn’t been possible.”

Under the existing contract, Rio must operate the smelter
until 2016 and then it can be progressively shutdown. It would
be expensive for Rio to close it faster, Key said.

The government has “no interest in a long-term subsidy of
the smelter,” he said. “If it can’t stand on its own feet,
then long-term it shouldn’t be there.”